Rise in China's defense budget to outpace economic growth target

Zhang Yesui spokesman for the annual session of the National People's Congress

To ease the burden on corporate tax payers, China plans to reduce tax and social insurance contributions of enterprises by around RMB2trn in 2019, and will reduce the current value-added tax rate of 16% in manufacturing and other industries to 13%, and lower the tax rate for transportation, construction, and other industries from 10 to 9%.

China's 7.5-percent increase in its annual defense budget in 2019, meanwhile, is faster than the pace of economic growth.

Deficit target has been raised to 2.8 per cent of gross domestic product from 2.6 per cent in 2018, providing more fiscal leeway for government spending.

Li also warned at the congress meeting that the trade war with the USA has had a negative impact on business activities in China.

China aims to maintain consumer inflation level at around 3 percent and create over 11 million new urban jobs.

This year, the Work Report has attracted extra attention given China's slowing economy and ongoing trade war with the US. A range target was also set for 2016 at 6.5-7 percent.

Besides cost cutting, to boost growth, the government announced RMB 577.6 billion (US$86.12 billion) in infrastructure investment, an increase of RMB 40 billion (US$5.96 billion) compared to previous year.

In a rare acknowledgment of weakness from the Chinese state, Premier Li Keqiang said the trade war with the United States, which has seen the two countries swap tit-for-tat tariffs on a combined $360 billion worth of goods, was having a material negative impact on the economy.

In terms of monetary policy, Lee said the government will keep it neither too tight nor too loose, and will not resort to a flood of stimulus while growth in M2 money supply and total social financing this year will be in line with nominal GDP growth.




The state media reported that China planned to have five aircraft carriers in the near future with plans to build nuclear carriers like the US.

However he still said the government wanted to promote IT, high-end equipment, biotech and next-gen automobiles and touted 'Buy China'.

President Xi Jinping's government is expected to use this year's session to announce measures to support economic growth including tax cuts and more support for entrepreneurs who generate China's new jobs and wealth.

Those external factors, Li said, have led the central government to decide on a somewhat softer and lower growth target for the country.

A balance will be struck between stabilising economic growth and fending off risks, it said.

"We will implement the military strategy for the new era, strengthen military training under combat conditions, and firmly protect China's sovereignty, security, and development interests", he said.

Separately, China's top banking regulator said on Tuesday that Beijing could "absolutely" reach an agreement with the United States on opening up its financial sector.

US Secretary of State Mike Pompeo said he thought both nations were "on the cusp" of a deal to end their trade war.

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